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Digital transformation is when businesses choose to adopt ‘digital’ ways of existing and operating as distinguished from anything else. It could be in the form of computers, laptops, smartphones, printers, scanners, emails, servers, cloud, internet, ERP, digital marketing, analytics, biometric system, auto-replenishment systems, AR/VR, mobile app, website, etc.
Thus, the scope of digitizing a business or adopting digital transformation is wide and can range from being simple to complex.
Digital transformation in the retail industry has enabled businesses to revamp their business models, operations, meet the changing customer behaviour and expectations, and stay competitive.
Digital technologies have played a big role in transforming the retail industry and especially by creating its alternative face – eCommerce. That does not mean digital transformation is only meant to cover the journey from retail to eCommerce. Companies like Ikea, Amazon (Amazon Go), and Zara to name a few have transformed the face of conventional retail with retail digital transformation.
Let us first see some of the ways in which retail businesses can adopt digital transformation.
Gone are the days when the sole focus of retail owners used to be buying low and selling high to make profits by not considering other factors. But retail businesses are not run the same way now. With retail data analytics, decision-making in almost every aspect of the business has become data-driven.
When a business goes digital, its systems also begin to generate data from all the corners of the enterprise. This data is gold for business. Data analysis can reveal meaningful insights for improving business strategies and performance across all the departments. From customer behaviour, product performances, region or store performances to managing business operations, meaningful insights from data analytics are highly emphasised.
For example, Zannier Group consolidates data from multiple ERPs to better understand customer purchasing patterns to influence real-time sales and inventory decisions to stay ahead in the game. Such insights are extremely useful to improve strategies and operations. Many ERP applications already come with inbuilt analytical capabilities with dashboards and metrics to help in decision-making.
Switch to Cloud
When we speak of digital transformation in retail, there’s much more than creating a website or posting cool content on social media. Here, we are talking about the backend platform and an important aspect of which is web hosting and infrastructure. This is where the cloud comes to the ground. If your online store is hosted on a local data centre, then its scalability, security, and performance are limited. Instead, on switching to cloud-based infrastructure, retailers can have greater flexibility, vast capacity, improved scope for scalability, and comparatively lower cost of ownership. These benefits could be eventually used to deliver a superior digital shopping experience for customers. There are many reputed cloud service providers in the likes of Amazon Web Services (AWS), Google Cloud, and Microsoft Azure.
After the dust (read that storm) around the novel coronavirus pandemic begins to settle, it will be time for retail companies to get closer to advanced digital technologies like Artificial Intelligence, Machine Learning, Internet of Things, Augmented Reality, and Big Data Analytics. These technologies have existed for a while now but only a few companies are putting them at work. Let us simplify and see how some of these technologies can help in retail digital transformation.
Artificial Intelligence: AI is empowering machines to mimic human-like cognitive abilities. And by that definition, there are many areas of business which can be carried out using AI. AI is increasingly becoming a common tool for carrying out or aiding business operations and activities. One such area is customer support. AI-powered chatbots are proving to be an effective alternative for carrying out the initial stages of customer support and closing it up with requests for feedback.
For instance, Tommy Hilfiger and Burberry have launched chatbots to help their customers navigate through their collection. Likewise, Amazon Go stores have replaced cashiers with automation and AI (helpful to reduce checkout time for customers). Robotic process automation has helped businesses achieve retail transformation.
Machine Learning: Machine learning (a subset of AI) can be used to make educated anticipation of dynamic customer behaviour and add flexibility and improvisation to business processes operations. What machine learning adds to data analytics is self-improvisation. It is not just about establishing trends or making predictions from existing data but automated learning by machines/software to improve its ability to make better assessments and deliver better insights based on new learning. Ecommerce giants – eBay and Kroger applies AI for price optimization which helps them to adjust prices and promotions based on updated data and information.
IoT: Another big thing knocking the doors of retail is IoT. Hyper-personalization is now a reality with IoT. Customers will have lesser worries for product/asset maintenance or replenishment of inputs. Queues in stores would be better managed which is often a complaint generator. With GPS and RFID, companies will be able to track individual items with high precision lending operational transparency with their supply chain partners. According to one study, 77% of retailers attributed IoT as an influencing force on customer experience.
Augmented Reality (AR) and Virtual Reality (VR): AR & VR technologies are gaining firm grounds in the retail space towards ensuring a superior shopping experience for customers. These cool toys have elevated the in-store experience of customers for many retail brands. For instance, IKEA’s Place app uses AR to help shoppers envisage (virtual preview) the selected furniture if placed at their homes.
Advantages of Digital Transformation
Achieving break-even is a concern but digital transformation is a long-term investment and also a continuous activity. It can only start. We have listed some of the key benefits of adopting digital transformation.
What can be done digitally or with automation should be done that way. The reasons are speed, accuracy, and volume leading to increased effectiveness and efficiency. Various retail automation or store automation solutions have proved this point.
Automation can help businesses become better at being process-driven. With growth in business and expanding customer base, companies need to be more technology-driven and less dependent on manual execution of routine operational tasks and activities. An even bigger reason is that the benefits of having better and efficient internal processes could be passed on to make a business model more profitable and more value-adding to customers.
When a business goes digital, its systems also begin to generate data from all the corners of the enterprise. This data is gold for business. Data analytics can reveal meaningful insights for improving business strategies and performance across all the departments. Such insights are extremely useful to improve strategies and operations.
Better and deeper engagement with customers, made possible with data analytics, always carries a positive influence on the brand image of a business entity. Efficient backend systems are critical to meet customer expectations consistently and create customer delight. Reduced checkout times, better personalization, prompt in-store and remote customer support, digital marketing outreach, device notifications, better inventory management, etc. are a few things which digital transformation could bring and keeping a check on these parameters could be highly instrumental in generating more footfalls and more business.
Case Study – Wal-Mart
Wal-Mart is harnessing the limitless potential of Big Data as a part of its customer service initiative. They are providing a smooth check out at the stores by using the data analysis on predictive analytics results on demand and billing counters needed. Wal-Mart also uses big data analysis on customer’s buying behaviour enabling them to personalize the shopping experience for its customers.
Wal-Mart is planning to use an Artificial Intelligence (AI) platform for better engagement and negotiations with its vendors and suppliers as it is not practically viable to negotiate with thousands of vendors about the best business terms which are also mutually beneficial.
Wal-Mart also leverages Machine Learning to optimize transportation costs and travelling time on delivery routes and to enhance its customer shopping experience.
For all these innovations they frequently come out with, the company extensively relies on the power of data. Wal-Mart is working on what will be known as the largest private cloud solution to process 2.5 petabytes of data per hour.
Case Study – IKEA
IKEA has revolutionized the way customers buy furniture these days by using digital transformation in their operations.
IKEA Place app allows customers to virtually place IKEA furniture products in their house using Artificial Intelligence (AI) and Augmented Reality (AR). Customers can try out different furniture combinations before finalizing their purchase by using this app. The company has used these technologies as a part of its retail digital transformation efforts.
IKEA is also leveraging on AI to make optimal use of returned products from customers. IKEA will not discard the returned merchandise completely, rather an AI-based platform will suggest them the most profitable destination where it can be put to use. They can sell it to a third party vendor, or donate it to charity or reinstate back to the stores depending on the company’s priorities.
IKEA intends to harness the power of the Internet of Things (IoT) via IKEA’s Smart Home project. The Home Smart consists of an expanding range of smart devices like smart speakers, smart lighting systems, etc.
IKEA has also launched a dedicated R&D hub ‘Space10’ lab which is tasked with coming out with smart products and living solutions for the future.
IKEA is also planning to integrate its platform with Geomagical Labs, an AI and AR start-up. The start-up has developed a 3D room modelling system using smartphones. This will help customers to realistically imagine their homes with their smartphones from any location.
There are many such digital transformation efforts IKEA has been making to give shoppers a superior experience and for a better living in the future.
Your Retail Coach (YRC) is a retail consulting and eCommerce outsourcing company in India offering a wide range of services in retail, eCommerce and retail omnichannel catering to a multitude of industries. In supermarket retail consulting, YRC consultants can help in the various stages of store set up of a grocery or supermarket business including store operations manual, digital marketing strategy, layout planning, inventory planning, IT-system integration, launch activities etc.